Surprise! Online Subscribers Worth Less

According to one analyst moving newspapers to an online model may cut costs but brings in far less revenue than needed.

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From paidContent

Even if newspapers migrate every print reader to paying online, they will still face big losses, according to one analyst. Annual income per paywall subscriber on TheTimes.co.uk and WSJ.com is just a quarter that from subscribers to UK quality dailies’ print editions, Enders Analysis’ Benedict Evans observes in a new note. Switching off the presses, after a hypothetical future print-to-digital tipping point, might save newspapers 25 percent of their total costs—but this is not enough to make up the gap from the smaller online income, Evans says. Even adding iPad income to web paywall revenue would only total half the income newspapers are currently making from print. This is essentially the quandary of trading physical dollars for digital dimes. Publishers like Rupert Murdoch may be starting to conceive of a time, at least in theory, when paid tablet and web editions become popular enough to consider switching off print… The problem with that, these numbers would suggest—even if all digital readers pay, publishers may need to double annual income per online customer to get there (ie. hike TheTimes.co.uk from £2 to £4 a week, and the iPad edition from £9.99 a month to £19.99). How’s this for a corollary?—If that sounds bad, imagine the situation for publishers whose websites are not starting charging. But at least those refuseniks can hold on to existing advertising, which an increasing number of them are considering to be sub-scale all the same… One ad buyer from media agency MEC tells Independent.co.uk that advertisers have responded negatively to TheTimes.co.uk’s paywall: “We are just not advertising on it. If there’s no traffic on there, there’s no point in advertising on there. Online, we have far more options than just newspaper websites – it’s not a huge loss to anyone really. If we are considering using some newspaper websites, The Times is just not in consideration.” Newspapers have faced a similar problem before, Evans says – to counter print circulation decline, publishers have added 20 percent more pages in the last decade, allowing the quality dailies to drive up cover prices by 112 percent in real terms. “But inflating the paper will no longer work: deflation is now the agenda,” Enders’ Evans says, noting recent newsroom downsizing. “What would a great newspaper with 200 journalists look like? Delane ran The Times as ‘The Thunderer’ with 16 pages – a deeply unfair comparison, but perhaps a relevant one.” Separate recent estimates by myself and by University of Central Lancashire journalism researcher Francois Nel had both found TheTimes.co.uk’s paid strategy could significantly reduce Times Newspapers’ losses, but not entirely.

This presents a real conundrum for newspapers who are losing advertisers and money hand over fist with just a few exceptions. Moving online was supposed to be their Savior as they would be able to slash overhead costs but at the same time they are charging far less than the print editions and still losing subscribers overall. One thing the newspapers forget about in the online model is that print subscribers are a fairly loyal group and will hold on to their subscriptions for decades. Also canceling most newspaper subscriptions normally requires the dreaded phone call to customer service whereas the online model is far more impersonal requiring just a couple of mouse clicks to drop a subscription. Online subscribers have far more choices for news and generally shorter attention spans as they want their news short and fast. In addition to that the threat of applications available for smart phones and mobile devices like the iPad make newspapers a tough sell. Take me for example. I'm notoriously cheap and therefore will pay for very little news content unless I can see the economic benefit of doing so. Currently I pay for a Kindle delivered subscription to the New York Times because it saves me nearly $500 per year than the home delivered paper and skips the ads to boot. I still receive the Washington Post because the economics aren't quite as compelling and since it's local to my area having the printed page is worth paying a little more despite the liberal tilt of the paper. As for the Wall Street Journal I only subscribe to the print edition if I can get a deal of $100 or so a year ( and they do exist) versus the more standard $260 or so and that definitely is cheaper than the electronic edition. Currently on my IPad I have USA Today but only because the app is free. I have read that they are considering charging for it in the future and if they do I'm gone since it's not crucial to my daily reading. One other disrupter to the electronic or online model is an app calle Flipboard for the iPad. This app allows the user to easily flip through social media content from their friends and read articles that they have posted. I have tried this and found this makes reading content from Facebook and Twitter far more readable than before which will lessen my need to look for news from the newspapers as it is being pushed to me for free from my friends. Based on the above I generate very little income for the newspapers whether they be in print or online and to make matters worse I rarely act on any advertising in the printed page and easily ignore the electronic ads when they do pop up so I'm not worth a plug nickel to the advertisers which isn't what then newspapers are counting on as they grapple with the print versus online argument. The great newspaper shakeout is still going on so it may take another year or two before we truly know the fate of the printed page or even the economic impact of digital readers as more devices hit the market every few months. One thing that may work in the newspaper's favor for adding digital subscribers if that is really what they want is that the prices of the mos basic readers has dropped to the $100 range and in the case of the Kindle is now available at retailers like Target and Staples which have a large nationwide footprint. But the real key will be to convince those under the age of 30 that they should pay for the news that they do read since they have grown up at a time when so much content has been free. If my children are an indicator of the future I would say it is bleak since what news they do read is all online and free. And we all know getting someone to pay for something they previously received for free is almost impossible.